Posts tagged ‘football’

Beware Applied Underwriters Workers Compensation Insurance

After you read this, there are more updates on 4/18

Well, I have managed to get myself into a scam.  It is not your normal scam, like the ones that are run by some mafia boiler room with guys working under aliases.  This scam comes via a major insurance company called Applied Underwriters (working under the names California Insurance Company and Continental Indemnity Company) which is owned by Berkshire Hathaway and none other than Warren Buffett.  If you feel sorry for Warren Buffett and want to give him a large interest-free loan for an indeterminate number of years, this is your program.

Update 4/16:  Let me insert here that Applied Underwriters has sent me a letter threatening a libel suit if I do not take down this post and a parallel review at Yelp.  AU Takedown demand here (pdf).   The gist of the matter seems to be the word "scam".  By the text of their letter, they seem to believe that "scam" is libelous because their company is well-rated financially and that they provide reasonable claims service.  I concede both these facts.  However, I called it a "scam" because there is a big undisclosed cost to their product that was never mentioned in the sales process, and that could only be recognized by its omission in the contract I signed -- that there is nothing in the contract committing them to any time-frame under which to return deposits and excess premiums I have paid, which may well amount to hundreds of thousands of dollars.  This fact about the contract is confirmed by their customer service staff, who have said further that the typical time-frame to return such over-collections and deposits is 3-7 years after the contract ends, or at least 6-10 years after the first of the deposits was made.

So is this a "scam"?  I believe that this issue is costly enough, and hard enough to detect, and far enough outside of expected business practices to be called such.  You may have your own opinion, but ask yourself -- When you enter into, say, a lease and have to put down a security deposit, is it your reasonable expectation that the landlord has the right in your lease to keep your deposit for 3-7 years (or more) after you move out?  /Update

Anyway, let's take a step back and look at this in detail.

First, I need to give a bit of background on how workers comp works.  When you are a new company, they assign you an experience rating -- that is a multiplier of your premium based on past loss experience.  There is some default starting number that if I remember right, in most states, is a bit over 1.0x.  Each year, the workers comp world looks back at your past history and computes a new loss rating -- higher if you have had more payouts, lower if not.  Generally it is based on three years experience not counting the last year (so 2-4 years in the past).  Your future premiums get multiplied by this loss rating.

Several years ago we had a couple bad injuries that drove our loss number into the 1.7-1.9x area.   Neither were really due to a bad safety issue, but both involved workers in their seventies where a minor initial injury led to all sorts of complications.  Anyway, my agent at the time calls me one day a couple of weeks before renewal and says that none of the major companies will renew me.  This seemed odd to me -- I understood that my recent claims history was not good, but isn't that what the premium multiplier was for?  In fact, if my loss history returned to normal, they would make a fortune as I paid high rates based on old losses but had fewer new ones.

Apparently, though, insurance companies have fixed rules that keep them from underwriting higher loss ratings.  Probably for the same reason Vegas won't take action on Ivy League football games any more -- just too much variability.  I found out later with my new broker we could probably have overcome this, but I learned that too late.

My broker at the time put me into a 3-year program from Applied Underwriters, in part because they were taking everybody.  This program was set up differently from most workers comp programs.  You had a basic policy, but there was a second (almost indecipherable to laymen) reinsurance agreement that adjusted the rates of the basic policy based on you actual claims.   Here is the agreement (pdf)  In other words, based on your claims, they would figure up at the end how much you owed and what your premium multiplier would be.

I saw two red flags that I ignored in signing up.  1)  The reinsurance agreement was impossible to understand, violating one of my foundational rules that I shouldn't sign things I don't understand.  And 2) The rate structure was very suspicious.  They touted a rate structure that could go as low as, say, $100,000 a year and was capped around $400,000 a year.  But when you pulled out a calculator, the $100,000 was virtually unobtainable.  It would require about zero claims.  If there were any claims at all, even for a few bandaids, the price would march up to $400,000 really fast.  It was the equivalent of a credit card teaser rate, and it should have made me suspicious.

Anyway, I was desperate.  For a business like mine, being told I had no workers comp insurance just a few weeks before the old policy ran out was a death sentence.  No one would write me or even quote me a policy that fast.  So I took the Applied Underwriters offer.  Shame on me, I should have worked on this much harder.

I won't bore you further with my voyage of discovery in trying to figure out how this thing works.  I will just tell you the results that I have found.  There are apparently other companies with similar issues, one of which is documented here: Applied Underwriter Suit (pdf)Newsletter publisher objected to scan of article, so I have taken it down at their request.  Here is a link to roughly the same article.

I spent hours and hours trying to figure out AU's statements.  There is a whole set of terminology to learn that is actually not used in most of the rest of the workers comp world.  The key page of the statement is page 7, which I will show below because it highlights several of the issues with Applied.  Page 7 is the page where the monthly premium is "calculated".  I have added the red numbers and arrows for the discussion below.


Here are some of the Applied Underwriter problems:

  1. Large deposits that must be made each year and may never be returned.    You can see that I am making deposits over $40,000 a year.  And that is each year.  The first year deposit is not returned.  The second year and third year are just added to it.  And I have found out since I joined this program that they are not contractually obligated to return them in any time frame.  Maybe some guy who was hurt in his thirties has a relapse and claims more money when he is 75.  Gotta keep your deposit just in case, don't we?  The timing of the return of your deposits (and overpaid premiums below) is entirely at their discretion, and that has been confirmed by their customer service staff.  In fact, their standard answer is that on average, such monies are not returned to customers for 3-7 years after the contract ends, or at least 6-10 years after the first deposits were made.
  2. Premiums based on the worst of your experience and their estimate of your losses, and they keep the difference for years and years.   For those in the same trap as me, I will try to explain the numbers above.  The estimated loss pick containment at the top is basically their estimate of your losses.  Note that it drives every number on the page and is basically their arbitrary number -- they could have set it anywhere.  The loss pick containment to date is just pro rated for the amount of the year that has gone by.  The 65% is an arbitrary number.    The $25,278 is my actual losses to date.  You can see where I point with #2 above, though, that my losses are irrelevant to my premiums.  They take the higher of my losses and what is essentially their estimate of my losses and I pay based on that.   Note that their higher number is not based on the reserved amounts on actual claims -- the $25,278 includes their reserves.  It is just the number they established at the beginning of my policy they think my claims are going to be and gosh darnit they are going to stick to that (and my claims even in my worst year in history were never even half of their estimate).  Yes, at the end of the policy if my losses stay low, they owe me money back for all the premium they overcharged me based on their arbitrarily high estimates.  But see #1 above -- there is no time horizon under which they have to return the money.  They can keep it for years and years.
  3. The final premium is, after all these calculations, entirely arbitrary.  So after this loss calculation (which essentially just defaults to their arbitrarily high estimate and not my actual loss history) they do some premium calculations.  These actually sort of make sense if you stare at the agreements for a really long time.  But then we get to the line I point to in red labelled 3.  It is the actual amount I owe.  But it does not foot to any other number on the page.  How do they come up with this?  They won't say.  To anyone.  It might as well be arbitrary.  I actually had some dead time and took all my reports and tried to regress to a formula they use for this, but I couldn't figure it out.   So all the calculation on this page is just a sham, it's the mechanical wizard in the Wizard of Oz.  It looks good, but does not actually directly lead to what you are billed.

So I thought I understood my problems.  I put in large deposits and overpaid premiums based on arbitrarily high loss estimates they make -- all of which will take me years and years of effort to maybe get back.  It turns out that I likely will have a third problem.  In the lawsuit linked above, the plaintiff complains that when they left the program after three years, Applied arbitrarily wrote up all their estimated losses on open claims to stratospheric levels and then demanded a large final premium payment at the end.  Folks on Yelp complain of the same thing.  You should know how this works by now -- the plaintiff will theoretically get all this back someday, maybe, when the claims prove to be less costly, but in the mean time Warren Buffet gets to invest the money for years and years (cost of capital = 0) until it is returned.

This is why I think Applied Underwriters actually likes companies with high lost histories.  Rather than costs, losses for them are excuses to over-collect on deposits and premiums -- money that can then be invested and held for years free of charge.

As an aside, I want to thank my new agents at Interwest Insurance for helping decipher all of this.  They actually flew a guy in to help me understand this policy.  They didn't get me into it, but they are helping me pick up the pieces as best we can.

Should I Just Give Up Expecting Consistency in Public Discourse

I generally have refused to even participate in the debate over Indiana's RFRA because most of the discourse is so incredibly ill-informed that it is impossible to have a serious discussion.  But I would like to make one observation:

Here is Ruth Marcus with as good a proxy for the anti-RFRA position as I can find:

Hold whatever religious views you want: about whether women should drive, or the morality of having children out of wedlock, or whatever. Your church gets to choose (and enforce its rules). You can practice whatever your church may preach. But if you operate a business, you shouldn’t be allowed to discriminate against people based on who they are, or whom they love.

OK, that is clear enough -- if you have a business that serves the public, you must accommodate all the public equally.  You can't decide not to do business with some group of people.  But this leaves me with a question -- many of the opponents of Indiana's RFRA, from Apple Computer to the NY Times editorial page to the governor of Connecticut (which has its own RFRA, lol) called for businesses to boycott the citizens of Indiana.  Why isn't such a boycott, essentially a refusal to do business with anyone from the state of Indiana irrespective of his or her position on the RFRA, illegal/immoral under exactly Marcus's logic?  Most folks see boycotts as an important first amendment right, a way to express displeasure with a group using the power of markets, without government coersion.  But it seems to be proscribed by Marcus's definition.   Am I missing something here?

I suppose supporters of the boycott would argue that it is OK to refuse business based on political opinions but not on race or gender or sexual orientation.  But supporting the legality of gay marriage is a political opinion.  Now what?

Try as I might, I can only think of two internally consistent positions on this issue:  1.  Businesses have the freedom to accommodate whomever they want; or 2.  All businesses, perhaps as a part of the state business license requirements, must accommodate all comers no matter what.  Number one leads to some ugly, but probably rare, incidents.  Number two causes a lot of friction with other first amendment rights such as speech and religion.

Any other position must take the form of "it is legal to refuse accommodation based on some things but illegal to refuse accommodation based on other things."  There is no way to derive a dividing line between the two based on first principles, so the line becomes a political football, with no viewpoint neutrality.   Basically, accommodation law is whatever the politician of the moment says it is.  Unfortunately, this seems to be what most folks are advocating.

And The Highest-Paid US Government Employee is....

...Probably Nick Saban, coach of the University of Alabama football team at around $7 million a year.  But Jim Harbaugh, recently hired by the University of Michigan for a $5 million base salary, apparently has incentives that can take that up to $9 million a year.

Apologists will argue that this is all OK and shouldn't worry taxpayers at all because these guys are paid out of the college athletic budget which is generated from sports revenue rather than taxes.  Hmm.  Any state parks agency probably generates millions or tens of millions each year in user fees.  Should we be OK with the state employee who runs those agencies making $5 million because it comes out of user fees rather than taxes?  Money is fungible.  $5 million more spent on a football coach is $5 million less that can fund other University services.

(PS - in the US Today ranking of college football coach salaries, 19 of 20 are at public institutions).

Update on Slippery Cell Phones

In my review of my Droid Turbo, I mentioned in passing that I was frustrated by how slippery a lot of cell phones were.  I was in the Verizon store the other day killing time while they fixed something on my kids' phone, so I tried holding a bunch.

The slipperiest by far were the HTC One M8 and the LG G3.  Both, probably not coincidentally, get high marks for being attractive due to their metal or faux metal backs, but the same backs make them like a wet bar of soap to hold.  You can put a no slip case on them of course, but then if you are going to put them in a case, why buy a phone that is promoted in large part on its looks?

My Droid Turbo is OK, with no slip surface around the edges but a very slick back, at least the nylon back one I have.

The Galaxy S5 is better than average.  Its back gets a lot of grief for being ugly, but it will not slide around in the hand and is comfortable to hold.

Until this week, the no-slip champion for me was the Moto X with the bamboo case (it is real wood veneer, not some plastic fake thing).  It looks good to my eye and it is very grippy in the hand.

But there is a new champion.  I tried the Moto X with the new football leather backing (again, real football leather).  This thing is not going to slide out of your hand (unless maybe if you are Jay Cutler).  The looks are ... different, but I could get used to it.  Phones for me are a convenience item, not a fashion item.  The Moto X's only problems are a small battery and a camera that is a bit weak.  Which is why I bought the Droid Turbo, which is a very similar phone but with a bigger battery.  Just wish they had all the cool Moto Maker options the Moto X has.

An Idea on Grade Inflation

Grade inflation is back in the news, as the Harvard Crimson reports that the median grade at Harvard is an A-.  This is clearly absurd.  It reminds me of some of the old Olympics judging where they had a 10 point scale but everyone scored between 9.7 and 9.9.  The problem is not necessarily that the mean is skewed, but that there is almost no room left to discriminate between high and low performance.

There is one potential way to combat this, and it was invented by colleges themselves.  Consider grading in high school.  My kids go to a very tough-grading private school where A's are actually hard to get.  The school sends (for Arizona) a fairly high percentage of its students to Ivy and Ivy-level schools, but the school produces someone with a perfect 4.0 only once every four or five years.  Compare that to our local public school, that seems to produce dozens of perfect 4.0's every year -- in fact since it adds a point for honors classes, it produces a bunch of 5.0's.

Colleges understand that a 3.7 from Tough-grading High may be better than a 5.0 from We-have-a-great-football-team High.  They solve this by demanding that when high schools provide them with a transcript, it also provide them with data on things like the distribution of grades.

Employers should demand something similar from colleges.  This is a little harder for employers, since colleges seem to be allowed to legally collude on such issues while employers can get sued over it.  But it seems perfectly reasonable that an employer should demand, say, not only the student's grade for each class but also the median and 90th percentile grades given in that same class.  This will allow an employer to see how the school performed relative to the rest of the class, which is really what the employer cares about.  And schools that have too many situations where the student got an A, the median was an A, and the 90th percentile was an A may get punished over time with less interest from the hiring community.

One way to get this going is for an influential institution to start printing transcripts this way.  The right place to start would be a great institution that feels it has held the line more on grade inflation.  My alma mater Princeton claims to be in this camp, and I would love to see them take leadership on this (the campus joke at Princeton during the Hepatitis C outbreak there was that at Harvard it would have been Hepatitis A).

Postcript - An alternate grading system from Harvard Business School:  When I was at HBS, they did not give A's and B's.  We had three grades called category I, II, and III.   By rule, the professor gave the top 15% of the class category I, the bottom 10% category III, and everyone else got a category II.  I actually thought this was a hell of a system.  It discriminated at the top, and provided just enough fear of failure to keep people from slacking.

Unionizing NCAA Players: A Simple Question in a Free Society, But A Total Mess In Ours

This week, the NLRB agreed to allow the players on the Northwestern University football team to unionize.   This is one of those issues that is simple and straightforward in a free society and a total mess in our less-than-free society.  Here are a few thoughts:

  1. In a free society, this is a no-brainer.  The Northwestern players are welcome to create an association among themselves and call it anything they like, including "union".  That association is free to try to negotiate with the university for better terms  (they are also free to fail at this and make no progress).
  2. However, it is clear that we are not a free society because the players had to go to the government and ask permission to form this particular type of association.  The reason is that associations called "unions" have been granted special powers and privileges under the law not available to other associations.  There are also a large body of very particular rules for how such associations may conduct business and how other groups (in this case the University) can or cannot interact with it.  It is a very tricky legal and philosophical question whether this package of benefits and privileges should be accorded to a group of college football players
  3. In a free society, the fact that the players don't get paid cash and that their universities make millions off the football program would be irrelevant.  The players freely agreed to the deal (in most cases, playing in exchange for free tuition and perhaps a chance to land an NFL job) so there is nothing inherently unfair about it.
  4. However, in our society, we have all sorts of government interventions.  I consider many of these interventions to be counter-productive, even occasionally insane.  But if one is to navigate such a society (rather than, say, go off and live in Galt's Gulch), I think the principle of equal protection is critical.  Arbitrary government interventions in free exchange are FAR worse when applied unevenly.  From an equal protection standpoint, I think the players may have a good case.
    • The law generally does not allow profit-making businesses (and the NCAA and college footfall are certainly those) to accept unpaid labor.  Many folks who don't deal with the Fair Labor Standards Act every day will say: "players are paid, they get free tuition."  But this is not how the FLSA works.  It counts non-cash wages only in very specific circumstances that are enumerated in the law (e.g. lodging).  Think of it this way -- McDonald's could not legally just pay all its employees in french fries and claim to be compliant with the law.  Also, large numbers of Division 1 football and basketball players never graduate, which shows a fair amount of contempt by players for this supposedly valuable "free tuition" compensation.
    • On the other hand, most college athletics are not profit-making.  My son plays baseball at Amherst College -- it would be laughable to call this a profit center.  I am not sure there are but a handful of women's teams in any sport that generate profits for their school, and even on the men's side money-making is limited to a few score men's football and basketball teams.   But the few that do make money make a LOT.  University of Texas has its own TV network, as do most major conferences.
    • The law generally does not allow any group of enterprises to enter into agreements that restrict employment options.  Google et. al. are getting flamed right now, and likely face criminal anti-trust charges and lawsuits, for agreements to restrict hiring employees from each other's firms.  The NCAA cuts such deals all the time, both severely restricting moves between schools (transfer provisions in Division I are quite onerous) and preventing poaching at least of younger players by professional leagues like the NBA and NFL.   The notion that top players in the NCAA are playing for their education is a joke -- they are playing in college because that is what they have to do in order to eventually be allowed in a league where they can get paid for their skills.
    • Actually trying to pay players would be a real mess.  In a free society, one might just pay the ones who play the most profitable sports and contribute the most value.   But with Title IX, for example, that is impossible.  Paying only the most financially valuable players and teams would lead to 99% of the pay going to men, which would lead to Title IX gender discrimination suits before the first paycheck was even delivered.  And 99% of college athletes probably don't even want to be paid
    • Part of the pay problem is that the NCAA is so moronic in its rules.  Even if the university does not pay players, many outsider would if allowed.  Boosters love to pay football and basketball players under the table in cash and cars and such, and top athletes could easily get endorsement money or paid for autographs by third parties.  But NCAA rules are so strict that athletes can be in violation of the rules for accepting a free plane ticket from a friend to go to his mother's funeral.  When I interview students for Princeton admissions, I never buy them even a coffee in case they are a recruited athlete, because doing so would violate the rules.
    • Much of this is based on an outdated fetish for amateurism, that somehow money taints athletic achievement.  It is hilarious to see good progressive college presidents spout this kind of thing, because in fact this notion of amateurism was actually an aristocratic invention to keep the commoners out of sports (since commoners would not have the means to dedicate much of their life to training without a source of income).  The amateur ideal is actually an exclusionist aristocratic tool that has for some reason now been adopted as a progressive ideal.   Note that nowhere else in college do we require that students not earn money with their skills -- business majors can make money in business over the summer, artists can sell their art, musicians can be paid to perform.  When Brooke Shields was at Princeton, she appeared in the school amateur play despite making millions simultaneously as a professional actress.  Only athletes can't trade their skill for money in their free time.

I am not sure where this is all going, but as a minimum I think the NCAA is going to be forced to allow athletes to earn outside income and accept outside benefits without losing their eligibility.

Back in 2011 I wrote an article in Forbes on this topic

If Parks Stayed Open, No One Would Notice The Government Shutdown

For several days now I have been highlighting article after article (here and here) where the only service downside of the government shutdown anyone can come up with is the closure of parks.  Here is another example, from the AP entitled "Lawmakers feeling heat from Government Shutdown".  Its all parks:

Some 800,000 federal workers deemed nonessential were staying home again Wednesday in the first partial shutdown since the winter of 1995-96.

Across the nation, America roped off its most hallowed symbols: the Liberty Bell in Philadelphia, the Statue of Liberty in New York, Mount Rushmore in South Dakota, the Washington Monument.

Its natural wonders — the Grand Canyon, Yosemite, the Smoky Mountains and more — put up “Closed” signs and shooed campers away.

Democratic Sen. Tim Kaine of Virginia said he was getting pleas from businesses that rely on tourists. “The restaurants, the hotels, the grocery stores, the gasoline stations, they’re all very devastated with the closing of the parks,” he said.

The far-flung effects reached France, where tourists were barred from the U.S. cemetery overlooking the D-Day beaches at Normandy. Twenty-four military cemeteries abroad have been closed.

Only 22,000 of those 800,000 run parks.  Apparently none of the others do anything we will miss.  Oh, they come up with one new one:

Even fall football is in jeopardy. The Defense Department said it wasn’t clear that service academies would be able to participate in sports, putting Saturday’s Army vs. Boston College and Air Force vs. Navy football games on hold, with a decision to be made Thursday.

Eek!  I joke about this but I fear that today this is going to bite me right in the butt.  Our company operates campgrounds on land we lease from the US Forest Service.  Since we pay all expenses of the operation, take no government money, and employ no government workers, we have never closed in a shutdown and the US Forest Service confirmed at noon yesterday we would not have to close this time.  But apparently someone above the US Forest Service somewhere in the Administration is proposing to reverse this, and illegally close us.  My guess is that they realize parks are the only thing the public misses, and so the Administration trying to see if it can close more of them, even ones that are operated privately and off the government budget.

Update:  This is very similar to what is happening in DC.  By trying to close us, the USFS is actually costing themselves more money (since we pay rent to them based on our revenues) with the only goal being to make the closure worse.  The Administration has ordered the same thing to occur in DC parks, where they are spending far more money "closing" monuments than they do just having them open all the time

Yesterday, the sight of a group of World War II veterans storming the barricaded monument built in their honor in Washington, D.C., became the buzzworthy moment from the first day of our federal shutdown.  The open-air, unmanned outdoor memorial had been barricaded to keep people from "visiting" due to the government shutdown, though there was no real (as in “non-political”) reason to have done so. Barricades certainly wouldn’t prevent vandals from busting in there at night if they wanted to. It was an absurd, petty move.

This morning, Charlie Spiering of the Washington Examiner returned to the memorial to find a gaggle of “essential” government workers there to barricade it once again. He tweeted that the employees fled after cameras started filming them working, but then came back to attach “closed” signs. A couple of them appear to be talking to the media. The barricades are apparently there, but have not been tied together and are therefore easily removed.

The Greatest Product Ever for Hyperactive Adults with the Attention Span of a Four Year Old

The Red Zone channel from DirecTV.  Basically the show's producers channel surf for you, flipping obsessively between as many as 8 simultaneous pro football games (sometimes with two split-screened at a time).  My wife says she gets a headache from watching it even for a few minutes.  But I think its awesome.  I actually flip back and forth between the RZC and whatever game I have chosen to watch that day for extra hyperactive bonus points.

All Is Right With the World Again

Arizona State has climbed back into the top 10 party school rankings.

This is the same institution that is opposing Grand Canyon University's entry into Division I athletics because, as a for-profit university, they are apparently not academically serious enough.  For some reasons GCU's accountability to shareholders isn't as pure and wonderful as ASU's accountability to former customers who will never use their product again except perhaps to attend a football game (e.g. alumni).

I Used to Respect Michael Crow. Never Mind. The NCAA Hypocrisy Never Ends

Arizona State University (ASU) has always had a certain niche in the college world, a niche best evidenced by their making both the top 10 party school and top 10 hottest women lists in the same year.  President Michael Crow has done a fair amount to, if not reverse this image, at least add some academic cred to the university.  ASU has been creeping up the USN&WR rankings, has a very serious and respected honors college (Barrett) and hosts the Origins conference each year, one of the most fun public education events I have attended.

But Michael Crow is now upset that another Phoenix area school has been given Division I status in sports, a for-profit college named Grand Canyon University.  This could really hurt both ASU's athletic recruiting in the area as well as dilute its revenues.  But in the supremely hypocritical world college athletics, he can't say that.  Instead, he says (Via Tyler Cowen)

The conference's 12 presidents signed and delivered a letter dated July 10 urging the NCAA's Executive Committee to "engage in further, careful consideration" about allowing for-profit universities to become Division I members at the committee's August meeting. In the meantime, Pac-12 presidents decided at a league meeting last month not to schedule future contests against Grand Canyon while the issue is under consideration.

"A university using intercollegiate athletics to drive up its stock value -- that's not what we're about," Arizona State president Michael Crow said in a phone interview over the weekend. "... If someone asked me, should we play the Pepsi-Cola Company in basketball? The answer is no. We shouldn't be playing for-profit corporations."...

"Our presidents have a pretty clear view that athletics works for the broader benefit of the university," said Pac-12 commissioner Larry Scott. "There's a discomfort with the idea that the sole accountability around athletics would be to a company that might use athletics as a marketing tool to drive stock price. There's a sense that changes the dynamics and accountability around athletics."

It is freaking hilarious to get lectured on accountability around athletics by the NCAA.  This is an organization that has been making billions off unpaid workers for years, workers who think so much of the value of the compensation they do receive (a free education) that most of the best of them never complete it.  I wrote more about the NCAA and athletes here.  In short, though, all these schools use the athletic program to raise capital (in the form of donations), likely far more so than a private school's sports team would raise its stock value.  Unless you grew up near the school, what do you know about well-known schools like Penn State, Ohio State, University of Miami, LSU, Alabama and even Notre Dame other than their athletics program?

Michael Crow reveals himself as just another incumbent that does not want competition.

In regards to Grand Canyon specifically, though, it would certainly appear that Crow, who's been spearheading the effort, is driven in part by protecting his own turf. Arizona State has long been the only Division I university in the Phoenix market. And in the bigger picture, it seems a bit self-righteous that the same group of presidents that in 2011 signed a $3 billion contract with ESPN and FOX -- and which last year launched a profitable television network of their own -- would play the "non-profit" card in calling out someone else's motives.

"It's different in the following sense," Crow said of the comparison. "Whatever income we generate from a television network goes to support the swimming team, the rowing team at Cal. We support thousands of athletes and their scholarships, their room-and-board, as part of the intercollegiate spirit of athletics. ... In the case of a for-profit corporation, those profits go to the shareholders."

His last point is a distinction without a difference.  First, I am not sure it is true -- Grand Canyon also has other athletic programs that cost money but don't bring in revenue. They also have a women's swim team, for example.  But who cares anyway?  Why is a student interested in swimming more worthy of receiving football largess than an investor?  Maybe Crow is worried that the people of Arizona that fund so much of his operations (and bloated overpaid administrative staff) might suddenly start wondering why they don't get a return for their investment as do GCU shareholders.

Postscript:  Phil Knight at Oregon and Boone Pickens at Oklahoma State (to name just 2 examples) get an incredible amount of influence in the university due to the money they give to their football programs and the importance of the football programs to those schools.  Boone Pickens says he has given half a billion dollars to OSU, half of which went to the football program.  But it is clear he would not have given a dime if he had not been concerned with the football team's fortunes and the problem of his university's football team losing to other rich guy's teams.  Is this really somehow better and cleaner than being beholden to equity markets?

The link in the original article is broken, so here is a better link to an article and video of how "non-profits" are spending their athletic money, on things like this palatial locker room for the Alabama football team that would make Nero's gladiators blush.

Good Idea

Several companies announced a new sensor product to keep track of the number and severity of blows to the head during sporting events like football.  For a while now, I have been predicting such equipment (once invented) would become required in most sports, with at least younger kids' leagues setting maximum numbers above which a player might have to sit out for one or more games, sort of like mandatory pitch limits in little league.

Six Years Later, My Question is Answered

You would have to be a Coyote Blog old-timer to remember back in January of 2007 when I asked

Is there any state where a college men's football or basketball coach is not the highest paid state official?

Robert Fischer-Baum, via Ilya Somin, has the answer.  In forty states, the highest paid state employee is a university football or basketball coach.  In all fifty states, the highest paid public employee works for a state university.   Which brings us back to my post earlier today.   Government student loans are to university payrolls as quantitative easing is to stock prices.

On The Looming Death of American Football

Death by tort lawyer in 3...2...1

A Colorado jury has awarded $11.5 million in a lawsuit originally brought against helmet maker Riddell and several high school administrators and football coaches over brain injuries suffered by a teenager in 2008.” While the jury rejected the plaintiff’s claim of design defect, it accepted the theory that the helmet maker should have done more to warn of concussions.

If the helmet makers are getting nailed, wait until every high school and college in the country is sued, not to mention the massive suit looming against the NFL.  Expect to see a debate soon, beginning in state legislatures, over tort protection for football.  Texas, for example, has several of the country's tort hellholes but if Friday night high school football is threatened, you can bet that the legislature will be moved to action.

Is The NFL Doomed?

I think Megan McArdle is being naive about the tort system in this country when she writes

So Junior Seau's family is suing the NFL over head injuries, which lead to chronic brain damage, and possibly his suicide.


But this lawsuit strikes me as pretty out there.  Junior Seau can't possibly have been unaware that football caused head injuries.  Nor even that multiple concussions are probably bad for you.  Note how many people are still playing, even though we now know this all too well.

Really?  I know of cases where people have successfully sued for drownings that occurred within feet of a no swimming sign.  I could easily ask if there are really people unaware that water can cause drownings.   Any sense of individual responsibility has been stripped from the tort system, such that it has become a way for folks who had bad outcomes of some sort to cash in from deeper pockets, irrespective of any reasonable sense of justice.

The NFL knows this and is clearly running scared.  How do we know?  Just look at Saints coach Sean Payton, who just went back to work after a one year suspension, a historically really large penalty for a coach.  He was accused of tangential association with a bounty system players and coaches had in place for great plays that may also have been a bounty system for injuring opposing players.  The NFL knows this goes on all the time, but must now prepare for the day they are in court getting sued for having an unsafe work environment.  They do not want a case based on negligence to be made far worse by accusations that the league was actively promoting behavior that created injuries.  So they threw the book at him.  The other folks who were suspended threatened the NFL with suits for all sorts of due process errors, but the NFL didn't care.  They can survive a judgement on an unjustified suspension of one or two players.   They cannot survive a judgement on causing hundreds to have brain damage.

Quoting from Walter Olson, who spends most of his time studying the tort system in this country:

 if subjected to the same injury liability rules that American courts apply to other businesses, organized football is unlikely to survive.

Why the Government is Bankrupt

I couldn't resist clicking through to this article supposedly laying out a "trend" that increasing numbers of women were finding "sugar daddies" to pay for college.  I was considering an article calling BS on the whole trend when my attention was diverted.  I found the best single-statement illustration of the attitude that is bankrupting this nation.   First, the basic story:

Nearly 300 NYU co-eds joined the site’s service last year seeking a “mutually beneficial” arrangement with rich older men — a 154 percent jump over 2011.

It was the second-highest number of new members for any college in the country.

Hundreds more young women from Columbia, Cornell and Syracuse universities also have recently signed up for the service, the site said.

“I’ll admit that I’ve thought about doing something like that,” said a Columbia junior who gave only her first name, Karen.

“It would be easier in some ways than working, taking classes and then spending years paying back loans.”

The writer is obviously trying to get me to be outraged, but all I can do is shrug.  There are a lot of worse things in the world to worry about than people entering into "mutually beneficial relationships."   But this is the line that stopped me short:

“Clearly, we need more financial aid if those are the lengths people are going to pay for school,” sniffed Ashley Thaxton, 20, an NYU theater major.

God, is there ever going to be  a non-problem that doesn't require more government spending.  How about lowering tuition?  Cutting back on bloated administrative staffs?  Eliminating useless academic departments?  Channeling less money to the football team?  Or how about we just accept that some people make personal choices that might be distasteful to us, but are really their own god damned business.

Enjoy the NFL This Weekend, You May Not Have It For Long

I think Walter Olson is dead on with this:

Steve Chapman at the Chicago Tribune looks at the cultural and legal responses to the mounting evidence that professional football inflicts brain damage on many of its players. He quotes my view that if the litigation system carries over to football the legal principles it applies to other industries, the game isn’t likely to survive in its current form.  [sorry for quoting the whole thing Walter, I just couldn't figure out how to excerpt it]

There is a very good chance that the NFL could go the way of Johns Manville or Dow Corning.  Those companies still exist after being sued into bankruptcy, but that is only because they had other businesses to shift into.  The NFL just has football.  And after reading the concussion stories recently, plaintiff's lawyers are going to have a hell of a lot better scientific case than they had with breast implants.    I honestly think it will take an act of Congress to keep the NFL alive, giving them some sort of liability exemption similar to what ski resorts got years ago.

And don't think the NFL does not know this.  If you are wondering why they handed out insanely over-the-top penalties for bounty-gate in New Orleans, this is why.  They are working to establish a paper trail of extreme diligence on player safety issues for future litigation.

As an aside, I find it frustrating that there is not a better helmet solution.

As a second aside, there is a guy here in Phoenix who was showing off an accelerometer for football helmets, with some kind of maximum single g-force or cumulative g-force trigger that would cause a player to be pulled from a game, sort of like how a radiation badge works.  Good idea.  Look for these to be mandatory equipment in high schools in colleges.    Takes the absurd guess work out of concussion diagnosis today, particularly since this diagnosis is done by people (the player and their team) who have strong incentives to decide that there was no concussion.

As a third aside, there are those who argue helmets are the problem.  Just as people drive less safely with seat belts and air bags in cars, helmets lead to less care on the field.  I will say I played rugby for years (without a helmet of course) and never had one concussion, or any head hit anywhere close to a concussion.  In amateur rugby in the leagues I played in, reckless behavior that might lead to injuries was strongly frowned upon and punished by the group.  Teams that played this way quickly found themselves without a game.  There were plenty of ways to demonstrate toughness without trying to injure people.

Using the the Criminal Activity that Results from Prohibition to Justify Prohibition

Apparently, Los Angeles has tough anti-ticket scalping laws.  This means that one is able to resell virtually any item one owns but no longer has a use for except tickets.  In this case, government officials yet again don't like someone who places little value on an item selling it to someone who places more value on that item (a concept that is otherwise the basis for our entire economy).  We can see the effect of such laws in London, where stadiums full of empty seats are juxtaposed against thousands who want to attend but can't get tickets, all because for some reason we have decided we don't like the secondary market for tickets.

A great example is embedded in this line in today's LA Times about crackdowns on scalping:

Jose Eskenazi, an associate athletic director at USC, said the university distributed football and basketball tickets free to several children's community groups but that scalpers obtained those tickets and sold them "at enormous profits."

I like the coy use of "obtained" in this sentence.  Absent a more direct accusation, I have to assume that this means that scalpers bought the tickets from the community groups.  Which likely means that strapped for cash to maintain their operations, these groups valued cash from the tickets more that the ability to send kids to a USC football game  (in fact, taking them to a USC football game would involve extra costs to the community group of transportation, security, and feeding the kids at inflated stadium prices).  It was probably entirely rational for the community groups to sell the tickets -- this is in fact a positive story.  Selling the tickets likely got them out of an expensive obligation they could not afford and generated resources for the agency.  Sure, USC was deprived of the PR boost, but if they really want the kids to come to the game, they can do it a different way (e.g. by organizing the entire trip).  This is not a reason for curtailing my right to sell my tickets for a profit.

Anyway, I have ranted about this before.  Sports team owners and music promoters have out-sized political influence (particularly in LA) and have enlisted governments to clamp down on the secondary markets for their products.

What I thought was new and interesting in this LA Times story was the evolving justification for banning ticket scalpers.  Those who have followed the war on drugs or prostitution will recognize the argument immediately:

Lee Zeidman, general manager of Staples Center/Nokia Theatre and L.A. Live, said in a separate declaration that scalpers "frequently adopt aggressive and oftentimes intimidating tactics.... To the extent that ticket scalpers are allowed to create an environment that makes guests of ours feel uncomfortable, harassed or threatened, that jeopardizes our ability to attract those guests to our property."

In court papers, prosecutors accuse scalpers of endangering citizens, creating traffic hazards and diverting scarce police resources.

"Defendants personally act as magnets for theft, robbery, and crimes of violence," the filing states. "Areas with high levels of illegal ticket sales have disproportionately high levels of theft, robbery, crimes of violence and narcotics sales and use."

Wow, you mean that if we criminalize a routine type of transaction, then criminals will tend to dominate those who engage in this transaction?  Who would have thought?  If this were true, we might expect activities that normally are run by normal, honest participants -- say, for example, alcohol distribution -- to be replaced with gangs and violent criminals if the activity is prohibited.

It's amazing to me that people can still use the the criminal activity that results from prohibition to justify prohibition.

Update:  John Stossel has an article on the London ticket scalping ban

Where Did the Mid-Range Jumper Go?

NY Times has a great interactive graphic of Miami and OKC shooting by location on the court (roll over the face pictures to get the actual graphics).

It provides some insight as to why the NBA game seems to be all threes or points in the paint -- the mid-range jump shot just does not have the same return on investment (ie points per shot).  Which begs the question, I suppose, as to why anyone shoots the mid-range jump shot at all  (look at Battier's and Hardin's maps - they are almost all threes and layups/dunks).  I suppose the answer likely takes the form of "you have to shoot mid-range to open up the other two zones", a sort of run to set up the pass in football strategy.  Don't know enough about basketball to say if this is true.

Update:  Also, the shot clock probably has a lot to do with it.  Given infinite time, teams would be able to get the shot they want, but in 24 seconds sometimes you just have to loft one up  as time runs out from wherever you are.

Here are the stats:  Close range -- 1.19 points per shot, 3-point -- 1.08 pps, mid-range --  0.80 pps

Resonance in My Feed Reader

My feed reader today had a series of oddly-related articles stacked right in a row.

First, I watched bits from the 1903 Princeton-Yale football game, the oldest surviving college football film  (apparently it is just barely old enough not to have Keith Jackson doing the play-by-play).  It is amazing how much more this looked like rugby than modern football.  The formations look just like rugby scrums except that the players are not locked together.  Note there are no huddles, just power scrum after power scrum.  Sort of like a missing link between the two games, and oddly less interesting than either.

I then was met with this post from Zero Hedge, discussing the current Greek bailouts in terms of a Nash Equilibrium, the game-theory concept developed by Princeton grad / professor John Nash (who was famously profiled in A Beautiful Mind).

It's not often I run into John Nash even once in a month, but two articles later I found this really interesting early letter, recently de-classified, from John Nash to the NSA, wherein he apparently anticipated many of the foundation of modern cryptography 10-20 years ahead of his time.

And its only a short walk from John Nash and cryptography to Alan Turing, and from Princeton to tiger stripes, so the next article I ran into was this one discussing a group of scientists who apparently have proved a Turing hypothesis for how tiger stripes (and other recurring patterns in animals) are formed.

The Onion, September, 2001

Ten years ago today, we were arguing over whether it was appropriate to even hold professional football and baseball games, much less enjoy ourselves in any way, in the aftermath of 9/11.

No one even contemplated trying to deal with it humorously.  Heck, I am not sure I have seen many attempts even a decade later to do so.  But just days after 9/11, the Onion published an amazing issue dedicated to 9/11.  It was funny without being disrespectful of the victims, and in many ways still on point.  They should have had a Pulitzer for it.  The articles are archived here.

Another Problem With Campaign Finance Legislation

There used to be two Americas -- the small portion who were criminals and the large majority of law-abiding citizens.  Now there is just one America, since with the proliferation of regulations, we all are guilty of something.  If we fall out of favor, we can all be rung up on charges.

Local Conservative pundit Greg Patterson makes this observation about the looming Jon Edwards prosecution, and observes that as much as he may dislike Edwards, his prosecution is downright scary

It looks like former Presidential candidate John Edwards is about to get indicted. Edwards is an awful person who embodies the characteristics that most of us despise.  His hypocrisy and hubris together with his unbelievably boorish behavior while his wife was dying of cancer are the stuff of Greek tragedy.

However, Edwards' downfall is also a great example of how the US has so criminalized the political process that the Government can indict anyone who falls out of favor. Once it was clear that Edwards no longer enjoyed any personal political authority, prosecutors combed through his entire political history and found this charge:

Much of the investigation, however, focused on money that eventually went to keep mistress Rielle Hunter in hiding along with former campaign aide Andrew Young, who claimed paternity of Hunter's child in 2007 so that Edwards could continue his White House campaign without the affair tarnishing his reputation. Investigators have been looking at whether those funds should have been considered campaign donations since they arguably aided his presidential bid.

Really?  Someone gave Edwards a bunch of money so that he could hide his mistress...and those funds "arguably aided" his presidential bid? That means that every dime that any candidate has ever received could later be classified as a political contribution because it "arguably aided" his candidacy.

How many millions has Edwards spent defending himself from this charge?  How much time is he going to spend in jail?  How many other candidates--or contributors--can be indicted for falling out of favor?

By the way, kudos to Patterson for bringing up this point in the context of his political opposition.  All too often groups seek to establish terrible precedents in the name of counting coup on political opponents.  For example, I have been depressed at how hard certain of my fellow climate skeptics have labored to try to bring warmist Michael Mann up on criminal charges.

By the way, I disagree with the second half of Patterson's post, wherein he tries to draw a parallel between the Edwards affair and shenanigans and political payoffs around the Fiesta Bowl.  Patterson describes politicians as having been "victimized" by the Fiesta Bowl, such victimization taking the form of the politicians accepting luxurious trips to college football games and failing to do all the necessary reporting for these boondoggles.

I have a hard time seeing this as victimization.  It would take a really, really, really naive and stupid politician to credibly argue that these trips were purely fact-finding trips and that they had no idea these expenditures represented an effort of the Fiesta Bowl to woo them in return for various quid pro quo's.  Politicians should not even be considering public subsidies of college football games, particularly ones that are so incredibly lucrative to the schools and bowl organizations.  Politicians could have avoided being "victimized" by such lobbying by simply saying that their city/county/state was not going to be handing out taxpayer-funded goodies to sports teams and games.  I don't necessarily want to send these guys to jail, but calling them victims is a joke.

It is interesting to see this attitude from a Conservative.  My mother-in-law the Boston Liberal takes the same line, that the evils that result from lobbying and outright bribery are entirely the fault of private enterprises and not of the politicians themselves.  Of course, the libertarian position on this is simple -- the fault is not any particular person, but the changes in government power that have put so many chips on the table.   If the government has the power to give or take billions, to make or kill whole industries, then it is worth a lot of money for individuals to harness this power or at least to protect themselves from being gutted by those who do manipulate the power.  To this end, 19th century corruption arguments are almost quaint, where the biggest concern was politician's ability to appoint their friends as postmaster.  Reduce government's power to give and take arbitrarily, and the amount of money spent on lobbying, elections, and outright bribery will fall precipitously.

Believe it or Not, Steroids Have an Actual Medical Use

The other day I was listening to a national sports-talk radio show and they were discussing an prominent athelete's recent injury.  They were expressing concern that the doctor who was treating the athlete (succesfully, it seemed) had treated other non-ahtlete patients with HGH and steroids.

Well, duh.  This is what has driven me crazy about the whole steroid craze.  Steroids were not invented to as sports performance enhancing drugs.  They were invented because they had a variety of medical uses, including aiding recovery from certain injuries.   Is the sports world really better off if we deny, say, Tiger Woods the injury-recovery tools that any non-athlete would have access to?

I will add here, just to tick people off and highlight yet another area where I am grossly out of step from the rest of America, that I have no particular problem with PED's in sports.  It's fine if governing bodies for whatever reason want to ban them, but its not a straight forward case to me.  These drugs have dangers, but getting our panties in a knot about people's informed choices on these dangers seems hypocritical to me as we routinely attend sports that have been demonstrated to cause, for example, major brain damage in athletes (e.g. football, hockey, boxing).

I suppose I get the comparability issue (people like records from 1900 to be comparable to those today) but to some extent this is outright hypocrisy as well.  Don't modern training techniques, like altitude sleeping chambers, equally make a mockery of comparability?  Baseball cries the most about steroids messing up the record books, then it does stuff like lower the pitching mound to help hitters and add the DH.

On the plus side, isn't there value to seeing our athletes play longer?  Wouldn't it be nice (if you are not a Red Sox fan) to see Derek Jeter play a little longer?  To see Tiger Woods return quicker from injuries?

And don't even get me started on the government's campaign to throw steroid users like Barry Bonds in jail.  As I said earlier, I don't have a particular problem if private governing bodies choose, for competitive or marketing reasons, to ban PED's and enforce that ban within their community.  But throwing Barry Bonds in jail for choice he made with his own body?

The NCAA Labor Cartel

Gary Becker via Ilya Somin:

The toughest competition for basketball and football players occurs at the Division I level. These sports have both large attendances at games-sometimes, more than 100,000 persons attend college football games– and widespread television coverage.... Absent the rules enforced by the NCAA, the competition for players would stiffen, especially for the big stars...

To avoid that outcome, the NCAA sharply limits the number of athletic scholarships, and even more importantly, limits the size of the scholarships that schools can offer the best players....

It is impossible for an outsider to look at these rules without concluding that their main aim is to make the NCAA an effective cartel that severely constrains competition among schools for players. The NCAA defends these rules by claiming that their main purpose is to prevent exploitation of student-athletes, to provide a more equitable system of recruitment that enables many colleges to maintain football and basketball programs and actively search for athletes, and to insure that the athletes become students as well as athletes.

Unfortunately for the NCAA, the facts are blatantly inconsistent with these defenses....

I expressed many of the same thoughts in this article at Forbes.  In addition to making the same points as Becker, I slammed on the whole concept of the "amateur athlete" as an outdated holdover from the British aristocracy and their disdain for commerce:

University presidents with lucrative athletic programs will do about anything to distract attention from just how much money their Universities are making off of essentially unpaid labor.  Their favorite mantra is to claim they are holding up an ideal of “amateurism.”

The whole amateur ideal is just a tired holdover from the British aristocracy, the blue-blooded notion that a true “gentleman” did not actually work for a living but sponged off the locals while perfecting his golf or polo game.  These ideas permeated British universities like Oxford and Cambridge, which in turn served as the model for many US colleges.  Even the Olympics, though,  finally gave up the stupid distinction of amateur status years ago, allowing the best athletes to compete whether or not someone has ever paid them for anything.

In fact, were we to try to impose this same notion of “amateurism” in any other part of society, or even any other corner of university life, it would be considered absurd.  Do we make an amateur distinction with engineers?  Economists?  Poets?

When Brooke Shields was at Princeton, she still was able to perform in the “amateur” school shows despite the fact she had already been paid as an actress.   Engineering students are still allowed to study engineering at a university even if a private party pays them for their labor over the summer.  Students don’t get kicked out of the school glee club just because they make money at night singing in a bar.  The student council president isn’t going to be suspended by her school if she makes money over the summer at a policy think tank.

In fact, of all the activities on campus, the only one a student cannot pursue while simultaneously getting paid is athletics.  I am sure that it is just coincidence that athletics happens to be, by orders of magnitude, far more lucrative to universities than all the other student activities combined.

Mindset of a Slave

I know that this pathetic bit by Kevin Drum was done to death by blogs last week, but I was on the road and still want to get my innings.  For those who have not seen it, Drum said (in a post about Obama and Libyan war):

So what should I think about this? If it had been my call, I wouldn't have gone into Libya. But the reason I voted for Obama in 2008 is because I trust his judgment. And not in any merely abstract way, either: I mean that if he and I were in a room and disagreed about some issue on which I had any doubt at all, I'd literally trust his judgment over my own. I think he's smarter than me, better informed, better able to understand the consequences of his actions, and more farsighted. I voted for him because I trust his judgment, and I still do.

A few thoughts

  1. Leaders on the Left have a strongly arrogant belief that they are smarter than ordinary citizens, and so it is their duty to make decisions for individuals because politicians will do a much better job of running people's lives than ordinary folks would themselves.  I have always supposed that for this governing philosophy to be successful, there had to be a deep parallel desire among the rank and file of the Left to be led, to put their own life in the hands of politicians who can be better trusted to make decisions for them.  This bit from Drum seems to be evidence of that desire.
  2. I know of absolutely no one, politician or otherwise, whose judgement I would generally trust more than my own.  Seriously, this is just pathetic.  Sure there are folks whose judgement I might trust, based on long experience, over my own on narrow issues (e.g. my wife on restaurant choices or my son on who to draft for my fantasy football team).
  3. Drum completely ignores the issue of incentives (as do most folks on the Left).  Even if a politician's judgement were better than mine on a certain issue, could I trust his or her incentives to make the decision based on the same goals I might have?  In the case of Libya, Obama has any number of incentives -- his poll numbers, reelection in 2 years, pressure from members of his own party, his legacy, his image in other countries, finding consensus among his advisors, etc  -- that might affect his decision-making but which I do not share.
  4. What in God's name in Obama's pre-Presidential career provided the basis for Drum's staggering trust in his judgement?  Where have we ever, ever seen this judgement exercised in any meaningful way, particularly on an issue with this many chips on the table?  Even since he has been President, where has this judgement been evidenced?   As I have said any number of times in the last two years, having a really, really good speaking voice is not a proxy for intelligence.
  5. To the extent that Drum voted for Obama based on his foreign policy judgement, Drum's perception of Obama's judgement had to have been based in large part on campaign statements and speeches Obama has made on foreign policy.  And those statements basically said that what Obama is doing now is illegal.  How can Obama have universally good judgement if he promised to do A in the campaign and is doing not-A today.  Both A and not-A cannot simultaneously constitute good judgement.

Taxpayer Money and Professional Sports

My column is up this week at Forbes, and discusses the role of taxpayer money in professional sports.

A  critical battle is underway challenging the very heart of the professional sports economics model — and it is not the NFL labor negotiations.  The unlikely fight is between a struggling league (the NHL), a suburb with delusions of grandeur (Glendale, Arizona), and a small, regional think tank (the Goldwater Institute).   At stake is an important source of value for nearly every professional sports team:  taxpayer subsidies....

Consider the Arizona Cardinals new football stadium in Glendale, for example.  In part due to the promise of a Superbowl bid, the local taxpayers paid $346 million of the total $455 million cost of the facility — a building that will be used just three hours a day on ten days a year for its primary purpose.  By contrast, in 2010 Forbes valued the Arizona Cardinals at $919 million, meaning well over a third of the franchise’s value accrues from the public subsidy of its retractable roof palace.  It can be argued that much of the increase in player salaries and team owner wealth in the NFL over the last twenty years has come at the expense of taxpayers.

If anything, this example from the NFL understates the importance of public funding of stadiums.  Why?  Because of all the major sports leagues, the NFL gets the lowest percentage of its total revenues from its stadiums.  Leagues like the NBA, and in particular the NHL, are far more dependent on stadium revenue for their well-being.

Let’s return to precocious Glendale.  In 2003, the city agreed to publicly fund $180 million of the $220 million cost of building a new arena for the Phoenix Coyotes hockey team.  Whereas Glendale’s subsidy of the Cardinals represented about a third of that franchise’s value, their $180 million subsidy of the Coyotes represents over 130% of the current $134 million value of the team.  Stuck in Arizona and losing as much as $40 million a year, the team is literally worthless without ongoing public subsidies.

The column goes on to discuss yet another bond issue proposed by Glendale to subsidize these teams.